National Association of Home Builders Discusses Economics and Housing Policy

Consumer Credit Expands, But At a Slower Rate

The Federal Reserve Board recently reported that growth in consumer credit outstanding decelerated in January 2014. Total consumer credit outstanding rose by 5.3% on a month-over-month seasonally adjusted basis, but the January growth rate was 0.9 percentage points less than the 6.2% growth rate that took place in December. There is now $3.1 trillion in total consumer credit outstanding.

The slowdown in consumer credit growth reflected a monthly decline in revolving credit. According to the release, revolving credit, which largely measures consumer credit card debt, fell by 0.3% in January after rising by 4.3% in December. As Figure 1 illustrates, the decline in revolving credit was generally widespread amongst major revolving credit holders. Revolving credit held by depository institutions fell by $18.9 billion while finance companies saw their revolving credit holdings shrink by $2.4 billion. Revolving credit held at credit unions and nonfinancial businesses also fell. Only revolving credit held in pools of securitized assets saw a monthly increase. However, these pools, which are outstanding balances upon which securities have been issued, accounted for 4% of revolving credit outstanding. Neither the federal government nor nonprofits and educational institutions hold revolving credit.

Overall, the decline in revolving credit was more than offset by an increase in non-revolving credit. The release indicates that non-revolving credit, which is largely composed of auto and student loans, rose by 7.5% in January, 0.6 percentage points faster than the 6.9% growth that took place in December. However, much of the January increase in non-revolving credit was not held by the institutions that also hold revolving credit. Rather, it was held by institutions that do not engage in revolving credit lending.

As Figure 2 illustrates, total non-revolving credit rose by $33.1 billion, more than offsetting the $21.6 billion decline in total revolving credit outstanding. However, $27.6 billion, 83.4%, of the $33.1 billion increase in non-revolving credit was held by the federal government, non-profits, and education institutions. The remaining $5.5 billion was held by institutions that also hold revolving credit and only partially offset the decline in revolving credit that was held by this group. The release indicates that while total non-revolving credit growth more than offset total revolving credit decline, leading to an overall increase in consumer credit outstanding, this phenomenon did not take place at the institutional level. Instead, institutions holding revolving credit saw their net holdings of consumer credit shrink while institutions that only hold non-revolving credit saw their consumer credit holdings grow.